Word on the street is that the Reserve Bank of New Zealand will once again keep rates steady at 2.50%, which isn’t all that surprising. What you should be looking out for though, is for any changes in the accompanying statement.
Take note that at the January rate decision, Governor Wheeler said that he expected GDP growth to improve thanks to strong demand both domestically and internationally.
However, he also expressed some concern that inflation may start to pick up. The markets took this as a sign that the RBNZ may be considering raising interest rates in order to counter rising inflation. Watch out for the underlying tone during the statement because if it sounds a little bit hawkish, it may give the Kiwi bulls some reason to celebrate.
That said, if you look back, you’ll notice that NZD/USD has actually traded higher for the day during five of the past six releases. More specifically, we normally see NZD/USD rally during the Tokyo session, right until the start of the London session.
This means that if you’re looking to play this report, you might wanna consider taking a bullish bias as a part of your trading analysis.
Here’s a look at how NZD/USD reacted during the past couple of releases:
January 31, 2013
December 5, 2012
If we do see a more hawkish tone from the accompanying statement, it could result in another strong rally during the Tokyo session. Setting a buy stop above market price or resistance levels could be a good game plan. If you missed the initial rally, you can still jump in during the London session as price tends to make another upside breakout until the next major or minor resistance level.
Of course nothing is set in stone yet as the RBNZ could have a few surprises here and there so don’t bet the farm. More importantly, don’t forget to manage your risk properly by setting a reasonable stop loss.
Lastly, if trading the news isn’t your cup of tea, then there’s absolutely nothing wrong about choosing to sit on the sidelines instead. Remember, no position is still a position.